Energy price cap will go up in January

Ofgem has announced the UK's price cap is going up to £1,928 from January to March, that's from the £1,834 it's at currently.

It means average annual bills will be allowed to increase by £94.

With energy costs so high, most people are already seeing their bills at the top end of the price cap, meaning this change will likely see your bills go up too.

Consumers are being reminded that the price cap is the wholesale energy cost per unit. It does not mean a cap on your bills, so the more you use, the more you will pay.

Ofcom's definition says: "The energy price cap is the maximum amount energy suppliers can charge you for each unit of energy if you're on a standard variable tariff."

A difficult time for many people

Ofgem chief executive Jonathan Brearley said: “This is a difficult time for many people, and any increase in bills will be worrying.

“But this rise – around the levels we saw in August – is a result of the wholesale cost of gas and electricity rising, which needs to be reflected in the price that we all pay.

“It is important that customers are supported and we have made clear to suppliers that we expect them to identify and offer help to those who are struggling with bills.

“We are also seeing the return of choice to the market, which is a positive sign and customers could benefit from shopping around, with a range of tariffs now available offering the security of a fixed rate or a more flexible deal that tracks below the price cap.

“People should weigh up all the information, seek independent advice from trusted sources and consider what is most important for them, whether that’s the lowest price or the security of a fixed deal.”

Why does it change?

The rise is linked to wholesale market fluctuations driven by geopolitical concerns, including disruptions to the Finnish Balticconnector (main gas-pipe from Finland to Estonia), the Israel-Hamas conflict, and industrial action in Australian gas production facilities.

Energy consultancy Cornwall Insight released it's final forecast for the Default Tariff Cap covering January to March 2024. They predicted a 5% increase.

Despite a recent dip in gas prices due to mild weather, the forecast suggests that any impact on bills in 2024 may be limited. The cap is expected to decrease after March 2024 but will remain higher than historical levels.

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